The word “bankruptcy” alone is terrifying, making most people feel embarrassed or ashamed because they let things get so far past due.

In this article I will discuss:

•  What is a chapter 13 bankruptcy?
•  Who should apply for a chapter 13 bankruptcy?
•  How do you apply for a chapter 13 bankruptcy?
• Where do you find a chapter 13 bankruptcy lawyer in Cleveland?
• And most importantly, whether or not a bankruptcy trustee monitors your income in Chapter 13

What Is a Chapter 13 Bankruptcy?

A chapter 13 bankruptcy, sometimes called a wage earners plan is a plan for regular-income individuals to pay back all their owed debt. Under this plan, debtors are not able to add on any additional collections and cannot continue those currently in place. 

This type of bankruptcy acts similarly to a consolidation loan where the individual pays a trustee each month and the trustee then distributes the payments to the creditors. During chapter 13 the individual has no contact with the creditors only the trustee.

The most notable aspect of a chapter 13 bankruptcy is that individuals do not have to surrender valuables and may be able to keep a home that has entered foreclosure. 

Anyone that is employed, even if it is self-employment is eligible to file a chapter 13 bankruptcy as long as the combined debt is not over $2,750,000 at the time of filing. 

An individual that has been recently denied bankruptcy in the last 180 days due to a failure to comply or voluntary dismissal may not be able to qualify for this type of bankruptcy.

Who Should Apply for a Chapter 13?

Deciding which type of bankruptcy is right for you can be daunting, there are so many different kinds and that can leave someone apprehensive to even file for bankruptcy. So, how do you know if chapter 13 is right for you?

Danger of Foreclosure

If you have fallen behind on mortgage payments to the point of risking foreclosure and you are worried about losing your home, filing a chapter 13 bankruptcy creates an “automatic stay” which means you cannot lose your home due to missed payments. While the lender will continue to send monthly payments and will add on some late payment charges chapter 13 will take into consideration the individual’s income and create small monthly payments to help you catch up on your mortgage. Once the payments are caught up chapter 13 will end, and you will become responsible for keeping your payments caught up. 

Danger of Repossession

Similarly, if you have fallen behind on car payments and are at risk of repossession you also can file for a chapter 13 bankruptcy. This again will stop the lender from repossessing your vehicle and will create small monthly payments based on income to help you get caught up. The individual will continue to make their regular monthly payments as well as a little extra to get caught up. 

Previous Chapter 7

An individual that has previously filed a chapter 7 bankruptcy is unable to file another bankruptcy for 8 years. If this individual finds themself in too much debt, they can file a chapter 13 bankruptcy to get caught back up. It is important to note in this case chapter 13 will be the only option available to them.

Taxes

An individual that has fallen behind on paying back taxes for several years and has a lot of tax debt may file a chapter 13 bankruptcy and create a payment plan. In this case, the court will determine which taxes are “priority” and which are “non-priority”. Those that fall under priority will be paid first and in full during the payment schedule. Those that are not a priority will be lumped together and paid back in a portion of what is owed, and the rest will be released at the end of the plan. 

Risk of Utility Shut-off

A chapter 13 bankruptcy will keep utilities from being shut off due to late or missing payments or get them turned back on if they have already been shut off. A lawyer can file an emergency bankruptcy and have utilities turned back on the same day. An individual will be able to make payments on the past due amounts and because these are considered unsecured debts it is most likely that the individual will not have to pay back all that is owed. 

Medical Bills

When an individual becomes ill or has a medical emergency the charges can pile up quickly even for those with health insurance. Medical debt is considered unsecured debt and during a chapter 13 bankruptcy the individual will pay back a portion of what is owed based on their income and the rest will be forgiven based on court-decision. 

Student Loans

A chapter 13 bankruptcy will stop lenders from trying to collect a debt. Because student loan debt is non-dischargeable, they must be paid back and will not go away because of bankruptcy. During bankruptcy, student loans are considered non-priority and will be lumped together with other debts and the individual will make small payments towards it during the payment plan. However, it will be up to the individual to pay the remaining debt and all the interest that has accrued once the payment plan has ended. 

Credit Card Debt

Credit card debt is considered unsecured debt and during a chapter 13 bankruptcy, the individual will pay a portion of these debts according to their income. Just like with student loans the individual will be responsible for the remaining balance and interest at the end of the payment period. 

Divorce

Trying to establish a new financial normal during a divorce or separation can cause debt to pile up due to the other half of the income disappearing. If an individual falls behind on child support or alimony a chapter 13 bankruptcy can be filed to make repaying those debts easier. The full amounts will have to be repaid but they can be broken down into smaller payments. The current monthly amount will still be due on top of the extra amount added to catch up on the debt. 

Other Financial Issues

Lawsuits, bank freezes, and wage garnishments can be the final push that sends an individual to look for options with bankruptcy. Creditors will stop at nothing to collect what is owed to them. If too much time passes, they can file to take portions of your checks or freeze your bank account until you take action. Filing for bankruptcy will not make the debts go away but it can make repaying them more manageable.

How To File a Chapter 13 Bankruptcy?

Once you have decided that chapter 13 bankruptcy is right for you, how do you get started? The first thing you need to do is make sure you don’t have too much debt for this particular type of bankruptcy. You also need to be sure you have some sort of income that you will be able to use to create a repayment plan. The court will not allow you to proceed if you don’t have enough income to create a feasible plan.

Once you have all of the information you need you will have to fill out all of the forms, if this is your first time filing a chapter 13 it is probably best to find a lawyer to help you through the process. You will also be required to take a credit counseling course before filing your paperwork. 

It is finally time to file your paperwork, a trustee will verify all the information you have submitted like bank statements, paychecks, tax returns, and other things you’ll submit later on. Within two weeks of the official file date, you will meet with your trustee and attempt to get your bankruptcy approved. You’ll have to pay several fees at this time.

Once approved you will take a debt education course and begin paying back your debts. After the repayment period, you can celebrate because you are almost caught up. Aside from any leftover interest or payments, you are completely caught up on the amount you originally filed with. 

Does a Bankruptcy Trustee Monitor Your Income in Chapter 13?

A trustee is an administration that is assigned to you during your bankruptcy. In chapter 13 a trustee is responsible for receiving monthly payments and then distributing them to creditors following the payment plan set in place. 

While a trustee will not monitor your income during a chapter 13 bankruptcy it is vital to report any changes to them, no matter how small. Any information that is withheld from a trustee can result in a charge of fraud resulting in a punishment of up to $250,000 and up to five years in federal prison. So, while the short answer is “no,” in the end the answer is kind of “yes,” considering any major income changes would need to be reported.

Where To File for Chapter 13 in Cleveland, Ohio

I’ve been practicing chapter 13 bankruptcy attorney in Cleveland, Ohio for nearly 19 years. I opened my firm in 2013 where and I’ve been able to change the lives of over 2,000 families. I’ve given these families a fresh start and I’d like to help you too. Feel free to contact me online or call me at 216-526-0309.

How to File for Bankruptcy with No Money

Depending on the complexity of your bankruptcy case, you may choose to file for a bankruptcy without an attorney. However, even with a slightly complicated case, consider hiring a Cleveland bankruptcy lawyer to save you time and hardship.

People who might want to consider filing without a bankruptcy attorney:

• Your income sets you below the median income for Ohio
• You own no property
• Most of your debt is dischargeable
• Your case isn’t likely to be flagged for fraud

This last consideration is perhaps the most tricky. Fraud in bankruptcy involves hiding or concealing assets to try to protect them from being taken. This includes moving assets before bankruptcy as well as intentionally falsifying or hiding information, including incomplete forms. This is perhaps one of the best reasons to hire a bankruptcy attorney, you get the benefit of their insight into the process and whether or not your case is likely to flagged for fraud.

Filing Bankruptcy for Free in Cleveland

If you choose the go-it-alone approach to filing for bankruptcy, your best bet is to contact the Cleveland bankruptcy court to explore your options. The Cleveland bankruptcy court also provides a step-by-step process of how to file without an attorney online. Information is provides in both video and text format, including the federal poverty guidelines, filing guidelines and even form instructions to help you complete your bankruptcy paperwork.

You may also be able to file bankruptcy for free in Ohio by filing through free legal aid clinics like the Ohio ACLU or services like Upsolve. You can also reach out to the Legal Aid Society of Cleveland to see if you qualify for free bankruptcy filing services.

Free Bankruptcy Consultation in Cleveland

Would you rather avoid the hassle and just find out from a license attorney whether or not you qualify for a free bankruptcy? I’m available 24/7 for consultation and I’m just a phone call away. Dial 216-526-0309 and discuss your bankruptcy options for free with a no-obligation consultation. Or, if you prefer, you can request a callback for a free consultation.

• $500 plus a $338 filing fee
• $808 “plus court costs”
• $250 to start, then another $250 plus the filing fee at a later date

So far, no bankruptcy attorney in Cleveland actually charges you only $500 in total to file for bankruptcy. Also, there are no court costs in Cleveland, so it’s confusing what “plus court costs” actually means. Make sure your bankruptcy lawyer actually discloses all the costs and cross-reference these fees with another bankruptcy lawyer to make sure they’re accurate.

If you have questions about bankruptcy costs in Cleveland or fees another lawyer is charging you, please feel free to call me at any time for a free, no-obligation consultation.

Cost of Filing for Bankruptcy in Cleveland, Ohio

You’ve probably heard it said a time or two that you “get what you pay for” for most things in life. While this phrase has become a bit cliché, it’s true in the case of bankruptcy attorneys, especially in Cleveland. Some clients have paid the price by having to shell out assets their bankruptcy lawyer failed to protect and in some instances, clients may even get their cases denied altogether.

When it comes to filing for bankruptcy, you’ll see that prices are all over the map. However, the costs basically boil down to this:

• Attorney fee (varies based on attorney experience, quality, etc.)
• Filing fee (fixed amount)
• Required course fee (fixed amount)

Let’s break down each of these fees and go over them in detail.

Cleveland Bankruptcy Attorney Fees

Attorney fees in Cleveland vary based on the attorney you hire. Attorneys charge various fees depending on their quality, availability, experience, and knowledge, among other things.

In Cleveland, attorney fees have a wide range of values, anywhere from as low as $500 to up to $2000 (or higher). Other factors that may impact the amount charged depends on whether or not you are able to pay all the costs upfront and whether or not your case ends up being a straight Chapter 7 bankruptcy or a Chapter 13 bankruptcy (fees may vary widely for Chapter 13 depending on the amount of time and work spent by the attorney).

Bankruptcy Filing Fees in Cleveland, Ohio

The filing fee in Cleveland for filing a Chapter 7 bankruptcy is a fixed amount of $338. Contrast this with a $313 filing fee for a Chapter 13 bankruptcy.

This amount is tacked on to whatever the attorney charges you. So, if the attorney charges $500, the total cost will be $500 plus $338 plus the course fee.

Required Course Fees Before Filing Bankruptcy

There is a course that is required (before filing) for all of those who are filing for bankruptcy in Cleveland. This course has a set price of $20. The course itself is a credit counseling course that can be taken online. There is no getting around the cost of this course.

See more information about the credit counseling course.

Total Cost of Filing for Chapter 7 Bankruptcy in Cleveland

If you add up all the fees, the lowest you’ll be paying for a bankruptcy attorney in Cleveland is going to be $500 for the attorney’s fees, plus $338 for the filing, plus $20 for the pre-bankruptcy course. This adds to a total of $858 at a bare minimum. For the highest cost lawyers, you’re looking anywhere from $2358 and higher.

How to Select a Cleveland Bankruptcy Attorney

Like most things in life, there is a happy medium when it comes to Cleveland bankruptcy attorneys. Let’s face it, you’re already going through a tough time so you’re probably not going to want to slap down all the money you have saved under your mattress just for a bankruptcy lawyer. On the other hand, you don’t necessarily want to go with the lowest cost bankruptcy attorney because there’s probably a reason why they charge so little.

Some people think they can “go it alone” and try filing themselves, only to get denied. Sometimes people go with a bankruptcy attorney who is cheap and then they end up actually losing more money in the process. Inexpensive lawyers might not always be available for you, be able to answer all your questions, or have the experience and/or knowledge to help you get the best result for your case.

In contrast, the most sought after bankruptcy attorneys who charge the highest fees might not have the time to give you personal attention. They might even be neglectful of your case because they’re busy working on more important cases.

Hire an Experienced Cleveland Bankruptcy Attorney

If you want a reasonably priced bankruptcy attorney in Cleveland who is also knowledgeable and experienced, give me a call. Not only do I have over 17 years of experience, but I have also helped over 2,000 people in the Cleveland-area file for bankruptcy. I’ll also guide you through the entire bankruptcy process and I’m there for my clients whenever they need me.

Still have some questions about bankruptcy or bankruptcy fees? Contact me online now for a free consultation and I’ll be more than happy to get you the answer(s) you need.

The short answer is to contact me or another experienced Cleveland-area bankruptcy attorney, who should be able to answer your Chapter 7 questions quickly and accurately after a few minutes.

That being said, here are the most common things that prevent people from being able to file a Chapter 7 bankruptcy:

1. You Make Too Much Money to File a Chapter 7 bankruptcy

Chapter 7 is intended to help low-income people, not people who have gotten into debt despite high incomes. The income cutoff is determined by the average income for your state, a figure that is recalculated from time to time.

Keep in mind that just because you exceed the Chapter 7 bankruptcy income cutoff, that does not necessarily mean that you cannot file a Chapter 7 bankruptcy. It just means that your case becomes more complicated and the court will need to look at your expenses and other financial information to determine whether you qualify.  

The cutoffs for Ohio are as follows:

1 person household cutoff = $41,946
2 person household cutoff = $52,139
3 person household cutoff = $59,724
4 person household cutoff = $72,764

The cutoff goes up an additional $7,500 thereafter for each additional member of the household.

If your income exceeds these levels, you still might be able to file a Chapter 7 bankruptcy, but it is more difficult. You will need to show that certain expenses, such as your mortgage, car payment, certain child care expenses, etc., are higher than average and leave you so little money left over at the end of the month that you are unable to repay your debts, even partially. You are not allowed to count all types of expenses in this analysis and the calculations are very technical.

2. You’ve Filed for Bankruptcy Within the Last 8 Years

You are only permitted to file Chapter 7 bankruptcy once every 8 years. If you get into debt problems during the 8-year period you either have to file a Chapter 13 bankruptcy, if you qualify for it, or find some kind of non-bankruptcy solution.

If you’re interested in the rules regarding multiple bankruptcy filings, read my article: “Can I File for Bankruptcy Again?”

3. You Have Valuable Property That May Be Seized

A lot of my clients technically qualify for Chapter 7 bankruptcy but decide not to file because it would cause the court to seize some of their property. The rules about what kinds of property can be seized are complex but I’ll spell those out in future articles.

The most common types of property seized by the court include houses, cars and portions of tax refunds for the following year. In addition, it is fairly common for whole life insurance policies, stocks and bonds, certificates of deposit, upcoming sales commissions, proceeds from divorce or personal injury lawsuits, and other types of assets to be seized by the court. After the court seizes the assets they are sold and paid out to creditors according to very specific rules.

Losing property as part of a Chapter 7 bankruptcy isn’t always the end of the world. I have had dozens of clients decide that they don’t care about their house or their car anymore as long as they can can eliminate their debts. I have also had clients work with the court to negotiate payment arrangements that allow them to keep property in a Chapter 7 bankruptcy that would otherwise be seized.

The important thing to know is that I analyze all of my clients cases ahead of time and let them know what to expect when they go into court. If they are not comfortable with that, then we find another solution besides Chapter 7 bankruptcy.

There are literally hundreds of things that can go wrong in a Chapter 7 bankruptcy.  This article concentrates on some common mistakes that people make when they attempt to file bankruptcy without an attorney or with an attorney who doesn’t really know what he or she is doing. 

Most of these bankruptcy mistakes simply lead to your bankruptcy being unsuccessful, but some of them lead to more severe consequences, such as the loss of property.  Truly horrendous errors, which do occur from time to time and can lead to prison time or your debts becoming permanent.

5 Common Bankruptcy Mistakes

1. Bankruptcy Mistake Number One

The most common mistake in bankruptcy is filing for bankruptcy without understanding how it will affect your property (including having “property” taken away that you didn’t even know was property).

Related article: “Can I Keep My House in Bankruptcy?“

Chapter 7 bankruptcy is sometimes called liquidation, meaning that the court takes away your property, “liquidates” or sells it, distributes the proceeds to your creditors, and wipes out your remaining debt.  Luckily, with a good Cleveland bankruptcy attorney, you will usually lose little to no property in Chapter 7 bankruptcy. Also, whatever property you do lose shouldn’t come as a surprise, but as something your attorney warned you about before the case was even filed. 

However, people who file bankruptcy without an attorney, or without a good bankruptcy attorney, may be in for some very unpleasant surprises when they go to court.

The Court is in Control, Not You

In the unfortunate event that you do file a Chapter 7 and later learn you stand to lose some property you didn’t expect to lose, people often think “Oh well, I’ll just dismiss my own case and then the court won’t take my property away.”  However, that shows a gross misunderstanding of how the process works.  You’ve put your life under the court’s control and the purpose of bankruptcy isn’t just to benefit you, but also to benefit creditors by seizing and selling your property so they can get at least some of the money they are owed. 

The law doesn’t allow you to dismiss your case to get out of this happening, period.  The court is not only able but required to take your stuff away and if this has the side-effect of ruining your life well, that’s just the way the cookie crumbles.

Mistakes with Automobiles and Bankruptcy

These types of nasty surprises most often affect automobiles and any tax refund you might be getting next year.  In the case of automobiles, most automobiles can be protected in bankruptcy by listing in your bankruptcy paperwork the right exemptions, which are sections of the Ohio Revised Code that allow you to protect part of the value of your vehicle in bankruptcy. 

Sometimes automobile exemptions are pretty straightforward, but they can get very tricky in a joint bankruptcy case or where you failed to verify prior to filing your bankruptcy that your auto loan company “recorded their lien” properly against your automobile (an auto lien is what gives creditors the right to repo your car if you don’t pay). 

Another issue that often comes up is that some auto finance companies will automatically repossess your automobile in a Chapter 7 bankruptcy even if you are current unless you execute a special contract called a reaffirmation agreement.  Unfortunately, most people filing Chapter 7 bankruptcy do not have enough income to be eligible to sign a reaffirmation agreement, and if they are dealing with one of these tougher auto finance company they are going to lose their car.  A good bankruptcy attorney has experience dealing with different auto finance companies and knows which ones will work with you and which ones will not.

Mistakes with Tax Refunds in Bankruptcy

Regarding the tax refund you might be getting the year after filing bankruptcy, people filing bankruptcy often do not list these as property in their bankruptcy paperwork because they do not view them as property.  However, even though you don’t actually have control over the money, your refund is property because it does belong to you and it is only a matter of time before it comes into your hands. 

Thus, people often lose at least part of their upcoming tax refund when they file bankruptcy.  Fortunately, by claiming the right exemptions and timing the date of your bankruptcy filing in a strategic way, it is usually possible to save all or part of your refund.  Other examples of property that people often lose because they didn’t realize it was “property” include proceeds of personal injury or other lawsuits, money or life insurance proceeds that may be inherited, and sales commissions and bonuses due to be paid from one’s job.

2. Bankruptcy Mistake Number Two

The second most common mistake people make when filing for bankruptcy in Cleveland is failing to calculate income, expenses, or household size properly. This is an easy mistake for the average person to make, granted, but it’s a mistake nonetheless. This is why you should always hire an experienced Cleveland bankruptcy attorney.

This might be news for some of you, but Chapter 7 bankruptcy isn’t available to just anybody– you have to be below a certain income threshold based on the number of people in your household.  While it may sound simple enough to calculate whether you’re under this threshold, it turns out that it’s actually quite tricky. 

In fact, even the rules used to calculate the number of people in your household are poorly defined and subject to dispute:  Some judges follow the “heads on beds” approach, which says that the number of people in your household is the number of people who sleep under your roof; while other judges follow the “economic unit” test, which says the number of people in your household is the number of people who are working together financially as one economic unit.

Things become most complicated, however, where the calculation of income in concerned.  In order to qualify for bankruptcy, you have to prove to the court that you pass not one but two income tests:  the means test and the test of “bankruptcy abuse.” 

What is ‘The Means Test’ in Bankruptcy?

The means test is a seven-page form where all of your income and expenses are listed.  The tricky part is, the income and expenses are almost never your actual income and expenses. 

The income portion is not the income you are making today, but every penny that anyone in your household earned in the six-month period leading up to the month you filed bankruptcy, divided by six.  Calculation of this figure is sometimes straightforward but can become quite burdensome where there are multiple income earners, multiple jobs or changes in employment and, most of all, cases in which there is business or rental income in the six- month period prior to the month in which you are filing bankruptcy.

The expense calculation portion of the means test is even less intuitive. For the most part, you don’t get to claim what your real expenses are, but are required to claim the expenses that they tell you to claim.  For instance, as of January 26, 2013, a one-person household filing bankruptcy in Cuyahoga County is required to put down that they pay $301 per month for food, $30 for housekeeping and other household expenses, $86 per month for clothing, $32 per month for personal grooming, and $116 per month for other miscellaneous expenses. 

The reason why the law requires this is that the courts got sick of people exaggerating their expenses to make it look like they were too poor to pay their debts even though they had enough money coming in the door to pay off at least some of them.  Fortunately, there are certain portions of the means test where you are allowed to put in your actual expenses and not required to use standard figures. These portions include any mortgage expense you might have, any out-of-pocket healthcare costs incurred in the six-month period leading up to bankruptcy, alimony and child support payments, one car payment per person filing bankruptcy, any taxes withheld from your wages, out of pocket costs for term life insurance, health insurance costs, and other costs.

The Importance of Filling Out The Means Test Correctly

If the means test isn’t filled out correctly, it may either trigger a motion to dismiss or an objection to discharge from the United States Trustee, a government agency that is part of the Department of Justice.  The UST is basically the bankruptcy police, and they may haul you in for tape-recorded interviews concerning how you arrived at the figures you put down on the means test form. 

Assuming they still believe that the form was filled out incorrectly, the UST will take you to court and attempt to persuade the judge to kick your case out of court.  If the UST suspects any deliberate attempt to fudge the figures, they will probably ask for an order from the judge saying that you will never, ever be able to file bankruptcy on these debts again, no matter how bad your financial situation becomes.  Needless to say, if you go into one of these hearings without an experienced bankruptcy attorney at your side then you are in way, way over your head and likely to regret filing bankruptcy in the first place.

Bankruptcy Abuse Test

Keep in mind that the means test is only one of two tests that you need to pass in order to get your Chapter 7 bankruptcy to go through.  The other test is called “bankruptcy abuse” and the problem with it is that it is quite vague. 

Basically, and this is only my opinion, but a lot of other Cleveland bankruptcy attorneys agree with me, the judge looks at your whole financial situation and just goes with his or her gut feeling.  If he or she feels that it would be cruel to make you pay off these debts, then you pass the test and you’re good.  However, if the judge looks at your situation and says, “This just ain’t right,” then your case gets dismissed and you don’t get your bankruptcy discharge. 

Although, I am oversimplifying here. In fact, there are a few standards within the bankruptcy abuse test that are very clear– such as you cannot be cash flow positive by more than $150 or so per month and you cannot count your mortgage as an expense if you are not actually paying it, but for the most part, this test really does consist of a gut feeling. 

For instance, should you be able to get your bankruptcy discharge even though you’re sending your child to a private school that costs $800 per month?  When questions like these present themselves, it is important to have an experienced advocate in your corner to prove that you are doing the best you can, that your expenses are all reasonable, and it would be an injustice to block your bankruptcy from going through.

3. Bankruptcy Mistake Number Three

One of the most common mistakes you see people filing for bankruptcy is paying debts they owe to friends or family members in the year prior to bankruptcy. This should be avoided if you plan on filing for bankruptcy.

When you pay off some people (but not others) prior to filing bankruptcy, the court doesn’t like it.  It isn’t illegal, per se, but it is favoritism and not fair to the creditors who didn’t get paid.  What that means is that the bankruptcy court is likely to order whoever it was who received the money to give it back to the bankruptcy court so that it can be distributed between all of your creditors according to certain rules. 

Usually, this sort of thing doesn’t really bother people because they just want their bankruptcy discharge and don’t care what happens to the money they paid to some credit card company just before filing bankruptcy.  However, when you pay money owed to friends or family members, the story is quite different.  For instance, if you pay your grandmother money that you owe her and then six months later file bankruptcy, grandma is then going to get a nasty letter in the mail saying to hand over the money or your creditors are going to sue her.  This isn’t the type of letter most people want their grandma to be getting.

4. Bankruptcy Mistake Number Four

The fourth most common bankruptcy mistake is people missing out on an opportunity to strip judgment liens off of a home. This may sound like complicated legalese but bear with me because it’s important.

When you file bankruptcy, it is often the case that the creditors have already filed successful lawsuits against you and then used those lawsuits to attach what is known as judgment liens to your home.  Judgment liens are just like mortgages and eat into your home equity with one important difference:  Judgment liens can be stripped off in bankruptcy. 

However, stripping judgment liens requires the filing of a special motion and a special hearing in front of the bankruptcy judge with full notice to creditors.  I have seen many, many cases in which bankruptcy attorneys do not notify their clients of judgment liens on their home or did notify them but never actually got around to filing the motion to strip the lien. 

After 120 days the bankruptcy case closed at which point it became much more expensive and difficult, if not impossible, to strip the liens off the home.  In most of these cases, the client was not aware of their bankruptcy attorney’s error and only learned that the judgment liens were still there when they went to sell their home but could not due to unsatisfied liens.

If you have lawsuits against you and own a home, it is imperative to verify whether there are any judgment liens on your home and whether they can be stripped off.  If it doesn’t happen then you are potentially going to impair the only thing that many people have to leave to their children, which is the value of their home.

5. Bankruptcy Mistake Number Five

These are a cluster of errors that don’t fit into one category. However, I see them happen over and over again in bankruptcy and they’re worth mentioning because you don’t want to be the one making one of these bankruptcy mistakes.

1.  Filing two Chapter 7 bankruptcies within an 8-year period, or filing a Chapter 7 bankruptcy within 6 years of filing a successful Chapter 13 bankruptcy.

You’re not allowed to file bankruptcy an unlimited amount of times.  You can file Chapter 7 only once every 8 years, although if you filed an unsuccessful Chapter 7 in the past then that is not counted against you.  Furthermore, if you filed a Chapter 13 bankruptcy in the past and it was successful, you usually must wait 6 years before filing a Chapter 7. 

If you are prohibited from filing a Chapter 7 by either of these rules, you may be able to file a Chapter 13 bankruptcy, although many people do not have enough income to qualify for Chapter 13 or do not qualify for other reasons.  It is very possible that you might not qualify for either type of bankruptcy, and will have to find some other option, such as a “debt workout”– a negotiated agreement with your creditors.

See more here in this article: “Can I File for Bankruptcy Again?“

2.  Mixing bankruptcy and divorce without understanding that the two sometimes don’t go well together.

If you are currently getting divorced or recently finalized your divorce, be aware that filing bankruptcy could wreak havoc on your divorce proceedings.  Usually this is not an issue if there is no valuable property involved in the divorce, but if there is valuable property then the bankruptcy court is going to look very carefully at that to make sure there is nothing fishy going on.  Specifically, what the court is concerned about is that sometimes, when people know they are going to end up filing bankruptcy anyway, they become very generous in divorce proceedings and allow their spouse to have valuable property that normally there would have been a big fight over.  For instance, I once saw a case in which a husband just gave his soon-to-be ex-wife his paid-off house because he was overwhelmed by debt and he knew his creditors were eventually just going to take the house anyway.  By letting his wife take the house, he thought he was protecting it from creditors and giving his children a permanent roof over their heads.

Wrong.  When the man filed bankruptcy, his creditors learned of his generosity and filed an action for what is called “fraudulent transfer” against him.  In other words, the creditors claimed that the man would normally have fought to keep at least some of the equity in his home, and only let his wife have it in order to prevent his creditors from getting anything.  The end result, after what had to have been tens of thousands of dollars in attorney’s fees, was that the bankruptcy court ordered the wife to sign the house back over into the husband’s name.  The house was sold and the proceeds were distributed to the husband’s creditors through the bankruptcy court.

3.  Not being able to account for lump sums of money that you had in your control within the year or two prior to filing bankruptcy.

Perhaps the ugliest scene I have ever witnessed in bankruptcy court occurred when an older woman came in to testify about her case.  Her taxes showed she had cashed out her retirement to the tune of $150,000 about a year before filing bankruptcy.  The bankruptcy trustee asked her some questions, became suspicious, then demanded to know what had happened to the money. 

The woman’s bankrtupcy attorney obviously had not prepared her for this line of questioning and all the woman could seem to do was continue to claim that the $150,000 had been put towards “bills.”  When the trustee asked what bills, she said gas, electric, and other run-of-the-mill bills that certainly could not have consumed $150,000 in a less-than-one-year period.  It did not help that this woman was visibly drunk at the bankruptcy hearing. 

The trustee and the woman went back-and-forth until they were screaming at each other and the woman called him a dirty name, at which point he kicked her out of the hearing.  I never heard what happened to the case but I highly doubt the woman got her bankruptcy discharge.

When you have a large sum of money from a retirement account, personal injury lawsuit, inheritance or life insurance settlement, large tax refund, etc., and then a few months or a year later you have none of it, you had better have a good explanation of what exactly became of that money.  Ideally your explanation should include receipts, bank statements, or other documentation showing that what you say is true. 

If you cannot explain what happened to the money the court is likely to think that you have “mattress money” you are hiding from the court or, just as bad, that you gave the money away or wasted it on drinking, drugs, or gambling.  If the court concludes this was indeed what happened to the funds, not only will you not get your bankruptcy discharge in the current case but it is likely that the court will permanently deny you the right to use the bankruptcy process to discharge your debt in any future proceedings.

How Can I Fix a Bankruptcy Mistake I Made?

Don’t worry, it’s not the end of the world. If you made a bankruptcy mistake a qualified and experienced bankruptcy attorney may be able to help you to reverse the situation or at the very least, minimize the damage caused. For a free consultation with an experienced bankruptcy attorney in Cleveland call 216-526-0309 or contact me online and I’ll be happy to go over your particular situation with you and help offer some solutions.

Finding a Bankruptcy Lawyer in Westlake

There is a short list of things you need to look for in order to narrow down your choices for a bankruptcy attorney in only a few minutes. Here are some of the things you should look for:

• Credentials: Look for a bankruptcy lawyer who is in good standing and licensed to practice law in Ohio.
• Experience: Although lack of experience isn’t necessarily a red flag, those with more experience will tend to know the landscape of bankruptcy much better as well as know more about the bankruptcy trustees.
• Communication: Most bankruptcy lawyers in Westlake offer a free consultation with clients. Think of this as your opportunity to see if you have a connection with the attorney. If the attorney isn’t listening to you, addressing your questions directly, or talking over you, you might want to consider looking for another attorney.
• Cost: When it comes to what attorneys charge for their services there is a sweet spot in terms of price. Too low and the attorney might be hard-up for business and too high of a price and you might not get personal attention. For a Chapter 7 bankruptcy, prices around $500-600 are way too low and prices near $2000 are way too high.
• Reviews: Look for a bankruptcy attorney in Westlake who has good reviews across multiple platforms. Look on Justia, AVVO, Martindale-Hubbell, Lawyers.com, Yelp and Google.

If all these factors check out then you greatly increase your chances of finding a good bankruptcy lawyer.

Contact a Bankruptcy Lawyer in Westlake

Luckily, you’ve already found an experienced bankruptcy attorney in Westlake. I have been rated highly on all of the most reputable attorney directories and have over 16 years of experience in bankruptcy. I’ve helped over 2,000 people in Ohio file for bankruptcy since I’ve started and I am on a first-name basis with nearly all of the bankruptcy trustees in Ohio.

Looking to file for bankruptcy or have questions about bankruptcy in Westlake? Feel free to call me at 216-526-0309 or contact me online and I’ll answer any of your questions at no charge to you.

For some reason, some people seem to think that they are smarter than the court system and they can just sign the deed to their paid-off home over to their brother and then file bankruptcy without having to worry about losing their home. Wrong.

Why You Shouldn’t Move Your Assets Before Filing Bankruptcy

The US Bankruptcy Court has been doing bankruptcies for a couple of hundred years now and it’s seen a thing or two.  Certainly, it has seen plenty of the kinds of amateurish strategies that people come up with in vain attempts to circumvent the bankruptcy code.  

In other words, no matter how smart you think you are, it is almost certain that the bankruptcy court is smarter.  Thus, if you move valuable paid-off property out of your name prior to bankruptcy you are likely to trigger what is known as an action to “avoid” the transfer of property. 

What that means is that the bankruptcy court is going to order the property moved back into your name so it can be sold and the proceeds distributed to your creditors. If the transfer is impossible to undo because the property has changed hands too many times, has disappeared, or for other reasons, then the consequences are probably going to be even worse.

In fact, the bankruptcy court may deny your bankruptcy discharge, meaning that not only will your debts not be eliminated by the current bankruptcy but they will become permanent.  In other words, now the only way to eliminate those debts will be to pay them off in full.  They cannot be eliminated by another bankruptcy filing, even if you follow all the rules and do not attempt to abuse the process the second time around.

What is Pre-Bankruptcy Planning?

In bankruptcy is something known as “pre-bankruptcy planning.”  It is a very grey area of the law and is very dangerous, especially for people who are inexperienced at interpreting the bankruptcy code.  There are certain types of pre-bankruptcy planning that courts have approved, such as spending down cash in certain situations. For example, a personal injury settlement or a bonus you obtained at work might qualify for reasonable and necessary living expenses prior to filing bankruptcy. 

Even so, if you are going to do this sort of thing then it needs to be done extremely, extremely carefully, and every expenditure you make needs to be documented with receipts so you can show what happened to the money. If you think you need to engage in this kind of activity then you need to retain an experienced attorney and you need to do it as early as possible before you have actually disposed of any of the money. Long story short, before considering such an action, contact a qualified Cleveland bankruptcy attorney first for a consultation.

Types of Pre-Bankruptcy Planning

Other types of pre-bankruptcy planning, such as moving assets into the name of a friend or family member in exchange for no money or other value, or moving assets into the name of a trust that you created to protect yourself from your own creditors, are viewed as totally illegitimate.  Unfortunately, there are still plenty of attorneys out there who will take your money to help you come up with these sorts of strategies, but they either don’t know what they’re doing or they are downright crooks.

What Should You Do Before Filing for Bankruptcy?

If you have debt problems and substantial assets you want to protect please avoid these kinds of “too-good-to-be-true” strategies and retain an experienced Cleveland bankruptcy attorney who can steer you through the process without utterly destroying your life and potentially sending you to prison. If you would like a consult for a free consultation please call 216-526-0309 or schedule a consultation online.

People in Cleveland often ask me whether or not they will be able to get credit or get loans after bankruptcy.  For the most part, I believe that concerns about bankruptcy preventing you from being able to get loans are over-exaggerated, with two exceptions.  I’ll explore some of these exceptions and I’ll show you which loans are easiest to get after filing bankruptcy as well.

Hardest Loans to Get After Filing for Bankruptcy

Post-Bankruptcy Home Loans

First and foremost, home loans are very difficult to get after bankruptcy. Mortgage brokers I know have said that most mortgage companies are looking for about two years of substantial, responsible credit usage after bankruptcy before they will even consider you for a loan. 

The reason that home loans are so difficult to get after bankruptcy is that home loans are big loans and the foreclosure process is a very long and expensive one. Keep in mind, creditors, especially these days, do not want to take a risk on someone they do not feel 100% about. So, they really want to hedge their risk when giving out mortgage loans after bankruptcy.

Post-Bankruptcy Credit Cards

The other area where it is more difficult to get credit is normal credit cards from banks.  Store credit cards like those from Best Buy and Home Depot are easier to get because those stores are trying to get you to buy their goods. However, unless your income is quite impressive, you are not going to be able to get a $10,000 unsecured credit card right out of bankruptcy.

Also, credit cards have high interest rates for a reason. With credit cards, the fact is that a lot of people end up not paying off their debt.  You will have to work hard at rebuilding your credit to earn your way back into the credit card company’s good graces. 

For more information, read my article, “How to Repair Your Credit After Bankruptcy.”

Easiest Loans To Get After Filing for Bankruptcy

Car Loans After Bankruptcy

Car notes are surprisingly easy to get after bankruptcy. In fact, you will probably be solicited by car financing companies about new auto loans before your bankruptcy is even over. 

The reason why this is is that these are fairly low-risk loans for financing companies, and they come with a high interest rate.  The loan company knows you can’t file for Chapter 7 bankruptcy again for another 8 years and has access to a complete snapshot of your financial life because that information is contained in your bankruptcy petition.

Furthermore, because you don’t owe any money to anyone anymore, the creditors don’t have to worry about you being garnished. They also don’t have to worry about them having to wait in line behind some other creditor before they can get paid. 

In the worst-case scenario, if you don’t pay they will repossess your car, sell it at auction, and come after you for any remaining loan balance that could not be satisfied out of the proceeds of the sale.  Obviously, this isn’t what you want to happen, but the point is that the creditor knows that, one way or another, they are almost certainly going to get paid.

Need Advice on Getting Loans After Bankruptcy?

Getting a loan after bankruptcy can sometimes be tricky and you may need someone to help you navigate this difficult landscape. If you’re looking for a home loan, you can find some good information here. If you still need advice, try reaching out to someone at your local bank.

If you need to speak with a Cleveland bankruptcy attorney, I offer free consultations to all my clients. Or, if you have any questions about obtaining credit after filing bankruptcy, please contact me at 216-526-0309 and I will answer those questions at no initial cost to you.

I offer a service that few, if any, bankruptcy attorneys in Cleveland offer:  For an additional fee, I will pull your post-bankruptcy credit reports from all three credit reporting bureaus and ensure that all of your debts are listed as discharged in bankruptcy. 

The creditor has a duty to make sure they mark these debts as discharged, but in my experience (about 40% of the time) at least one or two of them do not actually follow through on that duty.

Why Creditors Don’t Fix Credit Report Mistakes

There are many reasons why this happens. For instance, creditors may be lazy or disorganized, may not understand their legal duty to mark these debts as discharged, or may even deliberately avoid performing their legal duties because they do not want to do something that would help someone who declared bankruptcy on them.

Hopefully, your case falls into the approximately 60% of people whose post-bankruptcy rights get respected by their creditors.  If you are not, your creditors are violating what is called the “discharge injunction,” which is just a fancy way of saying they are violating the bankruptcy court’s order that says your debts are wiped out.  Obviously, this is bad because it hurts your ability to repair your credit after bankruptcy. 

What if Creditors Violate the Discharge Injunction?

If your creditors violate the discharge injunction, you have two options.  First, you can file a dispute with the credit reporting bureau that explains the issue and attach your bankruptcy paperwork showing them that the debt was listed in bankruptcy and you got your discharge.  Most of the time the creditor will not respond to the dispute letter, at which point you automatically win and the credit reporting agency will fix the record. 

This is the first option you should use because it is free, quick, and relatively easy.  However, if multiple creditors have not respected your right to have your debts marked as eliminated, that means you would have to file multiple disputes with multiple credit reporting agencies to get the problem solved.

The other option is to sue the creditor for violation of the discharge injunction. However, this process is not free. You will have to pay me a small retainer to go forward, which you may recover if we obtain money from the lawsuit. Furthermore, typically your bankruptcy case has closed at this point so you would have to pay $260 in court filing fees to reopen the case in addition to the filing fee for the new lawsuit itself.

If the lawsuit actually goes to trial, which is almost certain not to occur, the process would take months and months. However, most of the time this sort of case will reach a quick settlement. 

You will by no means get rich off this kind of lawsuit but you could get the debt marked properly in your credit report and get a small amount of money to reimburse you for having your rights violated. Apart from the initial retainer you paid me, the case would not involve any other attorney’s fees because those would be paid out of the settlement proceeds.

Need to Fix Your Credit Report?

Sometimes maneuvering through the financial landscape can be tricky and you need help. This is okay and understandable. If you’d like a free consultation from an experienced Cleveland bankruptcy attorney, or if you have questions about cleaning up mistakes in your credit report after bankruptcy, please call me at 216-526-0309.

You can also reach me online or request a callback if that’s more convenient.

A common concern among people in Cleveland filing for bankruptcy is, “Does bankruptcy stop lawsuits that are filed against them?” Let’s face it, most people don’t want to file bankruptcy and only do so as a last resort.  In many cases, what that means is that they wait until they get sued or have their wages garnished before they decide to file. 

Will Bankruptcy Stop a Lawsuit?

So does bankruptcy stop lawsuits? Yes, fortunately, bankruptcy does stop lawsuits and wage and bank account garnishments in their tracks. And, if you are being garnished, it is sometimes even possible to get a little of your garnished funds back after the bankruptcy is filed. 

In almost all cases, the lawsuit against you is immediately frozen and in most cases, filing for bankruptcy will ultimately require the person suing you to give up on their lawsuit and dismiss it.

How Does Bankruptcy Stop Lawsuits?

Bankruptcy stops lawsuits because of what is called the automatic bankruptcy stay, which is outlined in section 362 of the bankruptcy code. 

That code section, in layman’s terms, states the following:

• Bankruptcy stops lawsuits immediately
• Bankruptcy stops garnishment immediately
• Bankruptcy stops foreclosures immediately, even on the eve of your house being auctioned off
• Bankruptcy stops creditors from putting a judgment lien on your house or other property
• Bankruptcy immediately stops tax proceedings against you
• Bankruptcy stops collection calls, threatening letters, and other creditor harassment

There are exceptions to these rules, but they generally only apply when you file bankruptcy multiple times and the court has reason to believe you are abusing the bankruptcy process in order to stop lawsuits and other collection activity.

Bankruptcy Stops Lawsuits, But…

Even though bankruptcy stops lawsuits and other collection activities immediately, there are some points to keep in mind.

First, the lawsuits don’t stop until your bankruptcy case is actually filed. “Actually filed” means just what it sounds like: You have to pay me, provide various documents, and schedule an appointment to come in and sign your bankruptcy paperwork before I can file your bankruptcy papers with the 
court and stop the lawsuits.

For some reason, some people seem to think that when they make a down payment towards their bankruptcy that is somehow going to stop the lawsuits against them. That is simply incorrect. The court system does not care that you paid me a down payment because that is a business matter between you and me and has nothing to do with the court system.

Follow Through with Your Bankruptcy to Stop Lawsuits

Many people in Cleveland considering bankruptcy say they are going to file bankruptcy all the time and then never follow through on it.  If lawsuits stopped every time someone said they were going to file bankruptcy, the whole system would break down.  In conclusion, in order for bankruptcy to stop lawsuits, there has to be an actual bankruptcy filed in the court.

The other thing to keep in mind is that even though bankruptcy stops lawsuits immediately, there is a communication issue with the person who is suing you and with the court where you are being sued.  Specifically, there is a delay between the minute we file your case and the minute when anybody knows about it.  The bankruptcy court sends notice of the bankruptcy to all the creditors listed in your bankruptcy petition but that process usually takes about a week. 

Contact a Cleveland Bankruptcy Attorney and Stop Lawsuits

My Cleveland bankruptcy law office acts more quickly to notify the courts where you are being sued and, if your wages are being garnished, your employer. Nevertheless, these processes occur by fax and/or mail and the communication is not instantaneous.  

Don’t worry, everything will get sorted out in the end and if you get garnished after your bankruptcy is filed you are entitled to get those funds back, but the process is a little bit messy and takes time. Just be patient.

However, if you are being sued or garnished please call me, contact me online, or request a callback and I will do whatever is legally possible to stop the lawsuits and garnishments against you.